Energy Div to continue battle against Chevron on gas-wheeling charge

Energy Div to continue battle against Chevron on gas-wheeling charge

Despite persuasion by the US mission in Dhaka, the Energy Division is determined to continue its battle in the local court to settle the dispute with US company Chevron Bangladesh over its Jalalabad and two other gas fields concerning wheeling charge, reports UNB.

“We want to settle the issue in the court”¦ the law will take its own course,” Energy Secretary AMM Nasir Uddin told UNB Sunday, expressing his reluctance to speak on the issue as he thought it to be a subjudice matter.

According to official sources, Chevron lodged an arbitration suit with the International Centre for Settlement of Investment Disputes (ICSID) following a dispute over the wheeling charge for Jalalabad gas field.

The US company claimed a 4 percent payback from which Petrobangla has been deducting. But Petrobangla disagreed on the Chevron claim.

Having failed to settle the dispute through negotiation for several years, Chevron went to the ICSID, an autonomous body of the World Bank, making government and Petrobanla, who signed the production-sharing contracts (PSC) for the country’s Gas Blocks 12, 13 and 14, as defendants.

In a counter-move, Petrobangla filed a case with a local court arguing that Chevron, as a company registered in Bermuda, has no jurisdiction to go to ICSID for settlement of any issue since the Caribbean nation is not a signatory to the arbitration centre.

However, legal experts are also divided on the issue. One group of experts thought that Bermuda should be deemed as signatory as it is an overseas territory of the United Kingdom, which has signed and ratified the ICISD Convention.

Another group of experts thought Bermuda in no way should get the status of a signatory since it is an independent state and itself didn’t sign on the ICSID Convention.

According to official sources, the ICSID Tribunal has already set a schedule to progress the case, which includes subsequent hearings. The case is continuing on the schedule set by the Tribunal. Petrobangla also responded to the ICSID, raising its objection about the hearing.

Amid such a mixed-up situation, the US ambassador emerged in the scene and was learnt to have suggested the high-ups of the caretaker government that the issue should be settled following the methods laid out in the PSC.

She also said that Bangladesh, as a signatory to the ICSID Convention, should honor its obligation under this treaty, which binds the parties to arbitration to the exclusion of other remedy.

Following the US envoy’s move, the Chief Advisor’s office referred the matter to the Energy Advisor to check whether Petrobangla followed proper legal procedures in filing a case against Chevron.

But, after having consultation with its legal experts, Petrobangla stuck to its position and decided to continue the legal process in local court instead of moving for arbitration in ICSID.

Chevron Bangladesh President and Managing Director Andrew Fawthrop told UNB that his company went to the ICSID when the negotiation failed to resolve the issue.

“It was a last resort for us. Chevron is simply following the dispute-resolution mechanism that all of the parties agreed to when they signed the contracts,” he said.

”Arbitration is the only method to resolve the unsettled issues.”

Asked if there was any scope for resolving the issue beyond arbitration or court, the local Chevron chief said: “It’s always better to resolve any issue through discussion–our door is sill open.”

“We have a 40-year working relationship with Petrobangla and we are always open to dialogue. We get good support from Petrobangla on many issues. But any settlement has to be done within the contract. Everyone should honor the Contracts”, he noted.

When gas purchase and sales agreement for Moulavi Bazar was signed a few years ago, it was agreed the issue of the tariffs for the fields would be settled in line with the settlement of the Jalalabad dispute.

If Chevron, which took over from Unocal in 2005, wins the arbitration suit at the international settlement centre, Bangladesh will not be able to continue to deduct 4% from Chevron invoices. The oil giant has invested more than US$750 million in the country.

The gas reserve of these fields is estimated at around 6 trillion cubic feet

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